While we shared a brief insight on Investment Managers, this article points out some of the important aspects to consider while making a selection of an Investment Manager
When making a selection, Investors must decide what kind of investment manager they need. This depends on what point in the financial planning process they are at. An investor who is just beginning a savings journey, for instance, might not require a portfolio manager’s services. A Certified Financial Planner (CFP) who can instruct the investor on the fundamentals of retirement planning would be a better choice. On the contrary, a portfolio manager is excellent for an investor who has additional income after savings and wants to invest it in securities.
A background investigation of the investment managers’ professional regulatory credentials will identify any prior complaints and establish whether the manager has the necessary training and experience. The majority of investment managers and funds describe their investment philosophy on their websites as well as in their brochures. Investors should evaluate that philosophy (as well as the risk level) in the context of their financial objectives.
A manager’s past performance isn’t reflective of their future performance, but it can point towards the effectiveness of an establishment’s processes and decision- timber, so one should request a performance record over multiple time periods. This can be evaluated in absolute terms( did the strategy deliver earnings or losses and how important) and/ or compared to the establishment’s peers. And maybe to one’s own requirements too. It’s important to check whether performance is gross or net of fees.
One should anticipate being in regular contact with the investment manager, who may also communicate the establishment’s investment views. One should admit a comprehensive portfolio valuation at least once a quarter..
When comparing investment managers, investors should evaluate and understand fee structures. The fees of an investment manager depend on the type of investment asset. It’s important to have a clear understanding of the total fees the client will pay, and the nature of expenses as this can make a big difference to net returns. The fees could include management fees, performance fees, exit charges and other operating expenses such as custody charges apart or other third party vendor charges. Some experts believe that an investment manager should have skin in the game, which means that the pay should be based on performance. But it may not always be the best course of action since it may increase the level of risk that a manager must take on to produce returns that are in line with benchmarks.
Doctrines, styles, and processes will vary according to the manager, and one may have specific preferences. One important factor to consider is the volatility of the portfolio, and what the maximum drawdown has been during ages of market stress.
An investment manager should be accessible and take into account the unique requirements of the client. Investors must feel at ease contacting their investment manager at short notice to tailor service since financial demands are constantly changing.
